Brookfield Asset Management and its Singapore-based investment partner expect the $8.4-billion acquisition of G&W to close later this year or early next year.
The Surface Transportation Board on July 22 put an indefinite hold on the deal until it could weigh whether it was appropriate to grant the normal exemption for an acquisition that does not involve two railroads, a Class I, or a deal that links rail lines.
Under U.S. law, railroad transactions fall into four categories: major, significant, minor, and exempt. Brookfield and G&W sought to have the transaction exempt from board review, as typically happens when a non-railroad company buys a railroad.
In its decision, posted to the board’s website today, the STB concluded that the G&W transaction should fall under the exemption rules.
“After considering the comments and other information submitted into the record, the Board will allow the exemption to take effect,” the decision reads. “The comments submitted do not undermine the applicability of the … class exemption process.”
The comments came mostly from people who were concerned that G&W short line Providence & Worcester would drop periodic excursions. Rail labor, the SMART-TD of New York, also argued that the transaction would raise competitive concerns.
Board member Martin Oberman, in comments supporting the decision, questioned whether the traditional exemption rule was the right tool for the job given the size, scope, and importance of G&W and its 106 American railroads.
“For these reasons, in my opinion, this proceeding raises significant questions regarding whether transactions of this magnitude were contemplated when the class exemption regulations were adopted, and therefore raises questions as to whether it is appropriate for such major transactions to be eligible under those regulations in the first place,” Oberman wrote. “While I agree that, under existing regulations, this transaction may proceed as a class exemption, I do think the Board should consider in the future whether the exemption process should be applicable to transactions of such scale.
The board’s decision does require G&W and Brookfield to keep regulators up to date on the review of the deal by the federal government’s Committee on Foreign Investment in the United States.
At a special shareholder meeting on Oct. 3, some 83% of G&W shareholders approved the Brookfield deal, according to a regulatory filing.
G&W, Toronto-based Brookfield Infrastructure Partners, and GIC, an investment firm based in Singapore, on July 1 announced the deal to take the largest short line holding company private.
G&W owns 120 short lines, primarily in North America, but also has operations in Australia and Europe. G&W’s Australian operations are being sold as part of the deal.
A spokesman for G&W did not immediately return an email from Trains News Wire seeking comment on the STB’s decision.
I am very uneasy when I see foreign investors involved in the purchase of a US company.
Let the asset fire sale begin. Tell all of these short line operators-aggregators to get their financing in place. The market is about to present itself.
Well that “Committee on Foreign Investment “ is sure busy these days, with LOTS of foreign investments all across the U.S. in all kinds of industries. businesses , places,etc. Not that there’s anything wrong with that, right?